Senior Secondary (HKDSE) · Business, Accounting and Financial Studies

Double entry system: Practice Questions

5 multiple-choice questions marked as you go, and 5 written questions with worked solutions. All on Double entry system.

10 questions25 marksFree, no account

Question 1

1 mark

A business paid for advertising expenses by cash. Which of the following correctly describes the double entry for this transaction?

Question 2

1 mark

A sole proprietor withdrew merchandise with a cost of $$HK\$1,500$$ from the business for personal use. Which of the following correctly describes the double entry for this transaction?

Question 3

1 mark

A business received a cheque of $$HK\$3,000$$ for commission income. The cheque was deposited into the bank account immediately. Which of the following is the correct double entry for this transaction?

Question 4

1 mark

Which of the following groups of accounts all normally have debit balances?

Question 5

1 mark

Which of the following transactions results in a decrease in both assets and liabilities?

Question 6

2 marks

When a business receives cash from a customer for services rendered, which two types of accounts are affected, and how are they debited or credited under the double entry system?

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Question 7

4 marks

On 15 January, a business purchased inventory on credit for $$HK\$6,000$$. On 20 January, the business returned $$HK\$1,000$$ worth of defective inventory to the supplier. Describe the double entries required for both transactions.

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Question 8

2 marks

Briefly explain why every financial transaction in the double-entry system requires at least one debit and one credit entry, ensuring that the total debits always equal the total credits.

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Question 9

4 marks

State whether the following would typically result in a debit or credit entry for the specified account type:

a) An increase in an Asset account.

b) A decrease in a Liability account.

c) An increase in an Expense account.

d) A decrease in an Owner's Equity account (e.g., drawings).

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Question 10

8 marks

Mr. Alex Wong started a new graphic design business, "Wong's Creative Studio", on 1 May 2024. The following transactions occurred during May:

(a) 1 May: Mr. Wong deposited $$250,000$$ cash into the business bank account as initial capital.

(b) 3 May: Borrowed $$100,000$$ from ABC Bank, receiving the cash directly into the business bank account.

(d) 12 May: Provided design services on credit to Client A for $$45,000$$.

(e) 18 May: Bought office supplies on credit from Stationery World for $$5,000$$.

(f) 22 May: Received $$25,000$$ cash from Client A for services rendered on 12 May.

(g) 26 May: Paid monthly office rent of $$12,000$$ by cheque.

(h) 30 May: Mr. Wong withdrew $$15,000$$ cash from the business for personal use.

Required:

Prepare the general journal entries for each of the above transactions. Narrations are not required.

Write your answer out first, then check it against the worked solution.

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